A barometer of the rural economy in Plains and Western states has hit another record high, but hiring shortages could spell trouble in months ahead by limiting growth.
The Rural Mainstreet Index climbed nearly 10 points from April's 69.0 to 78.8 in May—surpassing the previous record of 71.9 set in March. It's the sixth straight month that the index has been above growth neutral. Nearly 62% of bank CEOs responding to the survey reported their local economies expanded between April and May.
The Rural Mainstreet Index surveys community bank presidents and CEOs in 10 states. The index ranges between 0 and 100, with 50.0 representing growth neutral.
“Sharp gains in grain prices, federal farm support, and the Federal Reserve's record-low interest rates have underpinned the rural Main Street economy," said Ernie Goss, economics professor at Creighton University's Heider College of Business, which produces the index.
While May's hiring index climbed to 72.7 from 62.5 in April, a lack of qualified workers dampened that good news. Nearly 90% of bank CEOs indicated that the difficulty of finding new employees at their bank and in their area was restraining growth.
Rural home sales continue to be hot, with the home-sales index climbing to a record 83.3 from April's 78.6.
“Residential home prices are increasing faster than farmland prices at this time," said David Steffensmeier, CEO of First Community Bank in Beemer, Nebraska.
Prices for farms and ranches increased as well. For the first time since 2013, regional farmland prices expanded for eight straight months. On average, bankers reported annual cash rent per acre of $228, a growth rates of 7.3% over the past year.
The confidence index, which reflects bank CEO expectations for the economy six months out, expanded this month to 78.8 from April's 72.4.
“Federal stimulus checks, strong grain prices, and advancing exports have supported confidence offsetting negatives from pandemic ravaged retail and leisure and hospitality companies in the rural economy," said Goss.